Marked Out

Bose Corp. insists it did nothing wrong. At worst, the company made a small, good faith error. That's not how the trademark office sees it.

The USPTO's Trademark Trial and Appeal Board (TTAB) ruled in late 2007 that there was a problem with one of Bose's filings. When the company in 2001 renewed a registration for its famous "wave" mark, Bose's general counsel, Mark E. Sullivan, had sworn that the mark was being used on various electronic devices, including audio tape players.

However, by that time Bose had stopped making and selling audio tape players. Thus, the company was wrong when it stated it was using
the wave mark on these products, the TTAB ruled.

This was not just an error in the renewal form, according to the TTAB. This was fraud on the trademark office. So the administrative tribunal ordered the registration to be canceled. The ruling is no aberration.

In the past few years, the TTAB has adopted an extremely tough attitude toward trademark filings that contain overly broad statements of use. The agency has canceled many registrations, belonging to companies large and small, because the companies wrongly averred that they were using their marks on some goods or services.

This new, tough stance of the TTAB is creating headaches for trademark owners, especially those with well-known, long-established marks. The owners fear that somewhere, in some old filing, there is an erroneous statement of use that could void their mark's federal registration.

"If you have vulnerabilities in your trademark portfolio, it can be a nightmare," says Douglas Masters, an IP attorney at Loeb & Loeb.

Fraud Redefined
The TTAB wasn't always this hard on trademark owners. Not so long ago, the agency routinely found incorrect statements of use to be mere good faith mistakes, and the agency narrowed the erroneous registrations to cover only the goods and services on which the marks were actually used.

That all changed in May 2003 when the TTAB decided Medinol Ltd. v. Neuro Vasx Inc. The trademark owner in that case incorrectly stated it was using the mark "Neurovasx" on neurological stents and catheters. However, the mark was being used only on catheters. The TTAB ruled on summary judgment that this misstatement constituted fraud and the entire registration should be canceled.

The case effectively rewrote the agency's definition of fraud, according to trademark experts. "Fraud involves an element of intent, so it is usually very hard to get summary judgment on this claim," says Beth Chapman, a trademark attorney at Oblon Spivak McClelland Maier & Neustadt. An individual's subjective intent--to knowingly or recklessly make a material misstatement--is a fact-based matter that is usually difficult to prove and thus is hard to resolve on summary judgment.

However beginning with Medinol the TTAB has ruled that a declarant's intent can be determined without examining the declarant's subjective state of mind.

"The TTAB has held in Medinol and subsequent cases that the standard [for fraud] is whether the declarant knew or should have known that its statement [of use] was incorrect," says Baila Celedonia, an IP attorney at Cowan, Liebowitz & Latman.

Crack Down
Not only has the TTAB adopted a tough objective standard, but it also has applied this standard mercilessly.

"By and large, the TTAB has said you're expected to know the facts you're averring to," Masters says. "If you get it wrong, it is fraudulent."

Even when a misstatement came from a pro se applicant, a foreign lawyer unfamiliar with U.S. trademark law or a party that carried out due
diligence (which proved to be faulty), the TTAB has found fraud.

"In the years since Medinol, the TTAB has heard every possible excuse for error, and it has rejected them all," Celedonia says.

This near strict-liability standard is worrisome for trademark owners because the trademark registration and renewal process provides so many opportunities for error.

A statement of use is made in the initial trademark application. Updated statements must be filed six years after a new registration issues, four years after that, then every 10 years thereafter. And it only takes one error in one filing to jeopardize the entire registration.

Companies with large or long-established trademark portfolios are particularly at risk because they have made many filings, which increases the chances that at least one of their statements of use was wrong. Moreover, the odds of an error are not inconsequential because prior to Medinol, businesses and their counsel didn't focus heavily on statements of use.

"People were a lot more loose about that," Celedonia says.

At-Risk Counsel
What's an anxious trademark owner to do? Experts advise companies to audit their current trademark portfolios to identify any possible inaccuracies in statements of use. This can be expensive, so companies may want to audit only their key brands and registrations.

If a problem is found in a pending trademark application, it might be fixed by filing an amendment with a correct statement of use. Such an amendment won't help, however, once the trademark has been registered, according
to Chapman.

If there's a problem in an existing registration, experts suggest filing for a new registration that is slightly different from the vulnerable one but which claims many of the same trademark rights. If the former registration is struck down, the company will receive some protection under the latter registration.
Going forward, in-house counsel should work carefully with their clients to ensure that all future statements are correct.

"Lawyers have to really push their business people to look at this," Celedonia says. "Don't give them a paragraph of uses to review. Give them a chart and force them to look at each item individually."

But there may be economic limits to what companies can do to protect themselves. "The need to go over everything with a fine-tooth comb does increase costs," says Jonathan Moskin, an IP attorney at White & Case. "A trademark registration may not be valuable enough to be double- and triple-checked by an attorney."